37) This morning, Wilson’s Meats had both a book and a bank balance of $1,500. Today, the
firm received 20 checks from customers that averaged $110 each. The funds from these checks
will be delayed by one day, which will cover both the processing and availability delays.
Wilson’s also received $4,000 of payments from customers who are billed and pay electronically.
The electronic payments are available immediately. What is the firm’s collection float as of the
end of this day?
A) −$6,200
B) −$2,200
C) −$1,200
D) −$1,800
E) −$3,700
38) UpTown Beverages has a checkbook balance of $132,462. However, when the financial
manager looks up the firm’s account on the bank’s website, the balance that appears is $147,918.
What is the net float? Is the net float a collection float or a disbursement float?
A) −$15,456; collection float
B) −$15,456; disbursement float
C) $15,456; collection float
D) $15,456; disbursement float
E) $0; neither collection nor disbursement float
39) Top Notch Tools has average daily receipts of $3,600. These receipts are available after 1.5
days on average. What is the NPV of eliminating the float if the cost to do so is $1,500?
A) $3,260
B) $3,900
C) $2,100
D) $5,400
E) $3,150
40) Atlas receives four checks per month. The amounts of the checks and their respective
processing and availability delays are as follows:
Amount
Average Delay
Check 1
$
1,500
1.2 days
Check 2
$
2,500
2.4 days
Check 3
$
1,000
1.6 days
Check 4
$
3,000
2.5 days
What is the weighted average delay?
A) 1.96 days
B) 1.93 days
C) 2.03 days
D) 2.11 days
E) 2.07 days
41) KN Florals receives the same checks each month. Of these monthly checks, 48 are for
$82.60 each, 15 are for $71.50 each, and 9 are for $40.70 each. The delay for the $82.60 checks
is 1.8 days, for the $71.50 checks 1.1 days, and for the $40.70 checks 1.3 days. Calculate the
average daily float. Assume a 30-day month.
A) $293.09
B) $287.46
C) $309.10
D) $299.47
E) $358.02
42) Metal Manufacturers receives three checks per month. The first check is for $194,000 and
takes two days to clear. The second check is for $318,000 and clears in one day. The third check
is for $38,000 and clears in 2.5 days. What is the weighted average delay, the average daily
receipts, and the average daily float? Assume a 30-day month.
A) 1.83 days; $16,667; $23,333
B) 1.46 days; $18,667; $27,333
C) 1.83 days; $18,447; $26,700
D) 1.46 days; $18,333; $26,700
E) 1.51 days; $18,447; $27,800
43) Rubber Tires receives three checks a month. The first check averages $842,000 and clears in
1.2 days. The second check averages $318,000 and clears in .7 days. The third check averages
$465,000 and clears in 2 days. What is the average daily float? Assume a 30-day month.
A) $69,600
B) $72,100
C) $73,600
D) $74,500
E) $68,900
44) Baker’s Confectionery just received a check from a customer for $1,289 that it has recorded
in its checkbook but has not yet deposited this check into the bank. After recording this check,
the firm has a bank balance of $16,218 and a book balance of $16,309. All the firm’s other
deposits have cleared and those funds are currently available. What is the amount of the
disbursement float?
A) $91
B) $246
C) $1,198
D) $2,487
E) $1,807
45) Sports ‘n More receives five checks per month. These checks average $811, $416, $6,420,
$22,900, and $8,700. The three larger sized check amounts are available after 1.5 days while the
two smaller check amounts are available after one day. What is the weighted average delay?
A) 1.48 days
B) 1.39 days
C) 1.46 days
D) 1.37 days
E) 1.00 day
416)/$39,247](1)
46) Fly-By-Night Airlines currently has $2.4 million on deposit with its bank. It also has a book
balance of $2.4 million. What will be its bank and book balances as soon as it writes a check for
$1.1 million to pay its fuel bill?
A) $2.4 million; $1.3 million
B) $2.4 million; $2.4 million
C) $1.3 million; $2.4 million
D) $1.3 million; $1.3 million
E) $1.85 million; $1.85 million
47) During the month Leslie’s receives four checks in the amounts of $100, $325, $200, and
$500. They are delayed for 1.6 days, 2.1 days, 2.6, and 1 day, respectively. What is the average
daily collection float? Assume a 30-day month.
A) $74.93
B) $63.80
C) $62.08
D) $59.47
E) $68.15
48) The Mesa Bank is offering your firm the free use of their lockbox services. They estimate
that you can reduce your average mail time by 2 days and they can save you a combined clearing
and processing time of 1.5 days by putting the checks into the clearing system sooner. Your firm
receives 320 checks a day with an average value of $2,500 each. The current T-Bill rate is .015
percent per day. Assume a 365-day year. What is the annual amount of income your firm can
earn if it installs this service?
A) $15,300
B) $14,800
C) $16,400
D) $153,300
E) $148,700
49) Prime Bank is offering your company the use of their lockbox services. They estimate that
you can reduce your average mail time by 1.5 days and they can save you a combined clearing
and processing time of 1 day by putting the checks into the clearing system sooner. Your firm
receives 198 checks a day with an average value of $2,300 each. The current T-Bill rate is .011
percent per day. Assume a 365-day year. Prime Bank will charge your firm an annual fee of
$27,500 plus $.20 per check. What is the annual net savings from installing this system?
A) $4,115.36
B) $3,480.00
C) $2,816.00
D) $3,756.78
E) $4,108.29
50) Solid Financial provides lockbox services. They estimate that your firm can reduce its
average collection mail time by 1.6 days and the clearing and processing time by 1.2 days by
implementing their system. Your firm receives 74 checks a day with an average value of $9,750
each. The current T-Bill rate is .014 percent per day. Assume a 365-day year. What is the net
amount of annual income your firm can earn if it installs this service at an annual cost of
$48,000?
A) $65,675.00
B) $62,640.00
C) $56,408.17
D) $55,232.22
E) $58,746.20
51) Uptown Bank provides lockbox services. They estimate that you can reduce your average
mail time by 2.2 days and your combined clearing and processing time by .75 days by
implementing their system. Your firm receives 65 checks a day with an average value of $298
each. The current T-Bill rate is .01 percent per day. Assume a 365-day year. The bank will
charge your firm $.15 per check. What is the annual net savings from installing this system?
A) $1,215.84
B) −$1,022.15
C) $548.32
D) −$1,473.09
E) $718.28
52) Downtown Bank provides lockbox services. They estimate that you can reduce your average
mail time by 1.6 days and your combined clearing and processing time by .5 days by
implementing their system. Your firm receives 654 checks a day with an average value of $975
each. The current T-Bill rate is .009 percent per day. Assume a 365-day year. The bank will
charge your firm $.17 per check. What is the net present value from installing this system?
A) $105,215.84
B) $100,022.15
C) $98,548.32
D) $103,731.67
E) $102,718.28
53) The net float of a firm is made up of disbursement float and collection float. Identify and
describe the components of both disbursement and collection float.
54) Explain repurchase agreements and the role they can play in a firm’s everyday operations.
55) Explain why money market preferred stock appeals to corporations.